While Mastercard says consumer spending has held up well, there is pressure that could crimp the card brand's growth in the short term.
For the quarter ending December 31, Mastercard reported net revenue of $5.8 billion, up 17% from about $4.86 billion the prior year. Earnings per share were $2.65, up 19% from about $2.22 the prior year. That was roughly in line with estimates from Visible Alpha, which projected net revenue $5.8 billion and $2.58 EPS. Mastercard projected full-year earning growth in the low teens.
But it also projected earnings growth of high single digits for the first quarter, which would be below analysts' expectations of 10.7%, according to Refinitiv IBES. That caused Mastercard's stock to dip about 2% on Thursday, based on concerns that the travel recovery beyond China is maturing and could stall in an economic downturn.
"At the end of the day we don't have the crystal ball, but based on everything we see we feel good about our outlook," CFO Sachin Mehra said during the earnings call.
China's reopening is a potential bright spot for Mastercard. In an
At Mastercard, China's inbound payment volume is at 20% of pre-pandemic levels, with outbound volume at 50%.
"There is still room for high growth in travel and cross-border payments in Asia," Mehra said, adding other cross-border travel corridors were growing at a healthy rate as travel stabilizes after three years of volatility.
Inflation, while waning, remains high, and is both a benefit and potential challenge for card companies like Mastercard and Visa. Higher inflation means higher value for payments, but higher prices could also curtail consumer spending.
In the fourth quarter, Mastercard's cross-border volume grew 31%, U.S. gross dollar volume grew 7%, and global gross dollar volume increased 8%. Transaction volume for the first three weeks of January was 21% higher than January 2022, though an analyst note from Jefferies said part of that growth was an easier year-over-year comparison due to the coronavirus omicron variant's impact on economic activity in early 2022.
During the earnings call, CEO Michael Miebach and Mehra stressed the company is prepared to pivot into cost-cutting mode if necessary, but trends suggest that's not necessary at this time.
"There's a resilient
The card brand's earnings came shortly after the fourth quarter gross domestic product report for the U.S. GDP showed a 2.9% annualized rate, according to the Commerce Department. Dow Jones economists had
Similar to the
Mastercard may also catch a break in Europe, as a
"A combination of local fiscal measures and warmer weather have alleviated some of these concerns," Mehra said.
Mastercard in recent years has increased focus on add-on services, such as security and technology development, and playing a role enabling innovation in digital assets and central bank digital currencies. That reduces the
Virtual cards could boost business payments, Miebach said, noting businesses' traditional reliance on paper checks. "We have a set of tools and a huge opportunity in B2B."
Mastercard and JPMorgan Chase in November launched Pay-by-Bank, a product that uses open banking, which allows for consumer opt-in for data sharing between banks and other third parties to speed payments. Open banking can also be used to help consumers and businesses use a bank account to access products from other banks, or non-financial products.
Account-to-account payments are often positioned as an
"The merchant or biller may pay for this visibility," Miebach said. "This doesn't take away from the power that cards have. We see it as co-existing. Our multi-rail strategy positions us to play in either field."